Reading 34: Understanding the Cash Flow Statement-LOS a 习题精 2011, activities, financing, investing, contrast

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Session 8: Financial Reporting and Analysis: The Income Statement, Balance Sheet, and Cash Flow Statement
Reading 34: Understanding the Cash Flow Statement

LOS a: Compare and contrast cash flows from operating, investing, and financing activities and classify cash flow items as relating to one of these three categories, given a description of the items.

 

 

Which of the following items would NOT be included in cash flow from investing?

A) Selling stock of the company.

B) Proceeds related to acquisitions.

C) Buying or selling a building.

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Selling stock of the company would be a financing cash flow.

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If Jackson Ski Company issues common stock, and uses the proceeds to purchase fixed assets such as equipment:

A) cash flow from financing would increase and cash flow from investing would decrease.

B) both cash flow from operations and cash flow from financing would increase.

C) cash flow from financing would decrease and cash flow from investing would increase.

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Cash flow from financing increases when stock is issued, while cash flow from investing decreases when spending for purchases of fixed assets.

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The actual coupon payment on a bond is reported on the statement of cash flow as:

A) a financing cash outflow.

B) an investing cash outflow.

C) an operating cash outflow.

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The coupon payment is recorded on the statement of cash flows as an operating cash outflow because cash flow from operations includes a deduction for interest expense.

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Which of the following is NOT a category on the statement of cash flows? Cash flow from:

A) financing.

B) operations.

C) sales.

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There are only three types of cash flows: financing, investing, and operating.

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Which of the following items would least likely be included in cash flow from financing?

A) Gain on sale of stock of a subsidiary.

B) Dividends paid to shareholders.

C) Purchase of treasury stock.

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Gains or losses will be found in cash flow from investments.

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Which of the following items is least appropriately described as a liability arising from an operating activity for a non-financial company?

A) The current portion of long-term debt.

B) Cash advances from customers.

C) Trade payables.

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The current portion of long-term debt arises from a financing activity. The other items listed arise from operating activities.

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Which of the following choices most accurately illustrates an operating liability and which most accurately illustrates a financing liability?

Operating liabilities

Financing liabilities

A) Short-term note payable Current portion of long-term debt

B) Customer advances Accrued liabilities

C) Accounts payable Current portion of long-term debt

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Operating liabilities result from the operations of the firm and consist of operating and trade liabilities such as accounts payable, customer advances, and accrued liabilities. Financing liabilities are a result of prior financing inflows. Financing liabilities (current) include short-term notes payable and the current maturities of long-term debt.

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When a U.S. company pays dividends to its stockholders, which type of cash flow does this represent?

A) Financing.

B) Operating.

C) Investing.

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Dividends paid to stockholders are considered cash outlays from financing according to U.S. GAAP.

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Jodi Lein, small business consultant, is currently working with RJ Landscaping, a sole proprietorship. She is trying to educate the owner on the importance of monitoring cash flows. Operating information as of the end of the most recent month appears below:

• Cash from sale of truck of $7,000.
• Cash salaries paid of $17,000.
• Cash from customers of $45,000.
• Depreciation expense of $5,500.
• Interest on bank line of credit of $1,000.
• Cash paid to suppliers of $22,000.
• Other cash expenses, including rent, of $6,300.
• No taxes due.

Using this information, what is the cash flow from operations for the month?

A) $11,200.

B) -$1,300.

C) -$300.

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The format of the question information suggests the use of the direct cash flow method. In this method, depreciation is not a component of cash flow from operations. Cash flow from operations = (all numbers in thousands of dollars) 45 – 17 – 22 – 6.3 – 1.0 = -1.3, or -$1,300.